World shipping is grinding to a halt

The Baltic Dry Index (BDI) measures the shipping costs for dry bulk goods, and provides an assessment of the price of moving the major raw materials by sea.

Simply put, it measures the cost of shipping goods; these ships are expensive and total number is quite inflexible.

Because of the number of cargo ships is essentially unchanging, the price for shipping matches the demand for shipping. On February 2nd, 2012 it plunged to its lowest level after it touched 647 points.

In the past 26 years since the Baltic index came into being, the index had never slipped below 650 points and the current fall in the BID has raised serious concerns among shipping companies.

If the world economy is improving, we should see the BDI continue to improve strongly from the low on February 2nd of 650.

Below are the 2 graphs for the BDI: 1) a magnified view of 2012, and 2) a high level view since 2000.